From your friend at CNB: Taking the mystery out of retirement planning

Sunday

Aug 26, 2012 at 12:01 AMAug 26, 2012 at 1:20 PM

The website, www.mymoney.gov, created and promoted by the Financial Literacy and Education Commission, is a great resource for financial information. One of the important topics covered in the website is retirement planning, including the publication titled “Taking the Mystery out of Retirement Planning.”

Jill Taylor

The website, www.mymoney.gov, created and promoted by the Financial Literacy and Education Commission, is a great resource for financial information. One of the important topics covered in the website is retirement planning, including the publication titled “Taking the Mystery out of Retirement Planning.”
The whole retirement scene has changed — it’s certainly not like it was before where workers were rewarded at age 65 with a gold watch, guaranteed pension, and health insurance for life. For many, retiring is a mystery. Earlier generations of workers could rely on employer-provided pensions, but now, many will need to rely on their own work-related and personal savings plus Social Security benefits. These savings have to last longer because Americans are living longer, and a longer life may mean more medical care, some of which will not be covered by the federal Medicare program.
A 2009 survey by the Employee Benefit Research Institute (EBRI) suggested that only 44 percent of Americans have tried to calculate how much they need to save for retirement. The retirement planning booklet on the My Money website provides tips on how to take control of your finances so that when you retire, you have the time and money to do what you’ve always wanted. A general retirement timeline looks like this:
At Age 50 Begin making catch-up contributions, an extra amount that those over 50 can add, to 401(k) and other retirement accounts.
At 59-1/2 No more tax penalties on early withdrawals from retirement accounts, but leaving money in means more time for it to grow.
At 62 The minimum age to receive Social Security benefits, but delaying means a bigger monthly benefit.
At 65 Eligible for Medicare.
At 66 Eligible for full Social Security benefits if born between 1943 and 1954.
At 70-1/2 Start taking minimum withdrawals from most retirement accounts by this age; otherwise, you may be charged heavy tax penalties in the future.
Some key points in retirement planning, as outlined in the website’s booklet, include:
Tracking Down Today’s Money You need to have a clear idea of how much money you actually have so you can support yourself in retirement. That entails adding up the value of your current assets.
Tracking Down Future Money (At Retirement) After tracking down today’s money, you can estimate how much that money could be worth because it will probably grow between now and retirement. How your money increases over time will depend on the nature of your investments, the rates of return, and other factors, such as the economy.
Tracking Down Future Expenses Taking a realistic look at expenses in retirement and how they’ll be affected by inflation will give you some idea of whether the money you have saved will be enough. Looking at your spending patterns and factoring in how they could change over time is very important in this process. Almost 20 percent of retiree income will be spent on health care.
Comparing Income and Expenses Compare your income with your expenses during retirement and see if they match up. This is the number you’ve been working toward as you’ve investigated your assets and income, then expenses, and figured the effects of time on your money.
Few people will have exactly the amount of money they’ll need in retirement. Most will end up with a negative figure — a gap — when they do the math. The online booklet can help you figure out how much more to save each month. As you set aside more money, the combination of savings and earnings will help close the gap.
You may use this resource tool and accompanying worksheets to discover changes you can make today for a financially secure future. You can also see if your financial institution has a Trust and Investment Services department with experts to assist you with financial planning for retirement.

Jill Taylor is the marketing and public relations officer for County National Bank. She can be reached via email at jill.taylor@countynationalbank.com. Her column appears biweekly.